October 30, 2009

Accountants make recommendations in wake of school district bookkeeping errors

Accountants make recommendations in wake of school district bookkeeping errors
A series of weak controls led to several inconsistencies in the accounting of the Parshall School District, says an accountant who investigated the issues.
John Mongeon, a shareholder with the Brady Martz accounting firm, said there is no reason to believe that fraud was committed in accounting practices that were investigated back to the 2006 school year. Instead, marginal controls of the bookkeeping led to numerous discrepencies in payroll, the activities fund and the hot lunch program.
Gordy Smith, the North Dakota state auditor, flanked Mongeon Monday night in the Parshall High School library as Mongeon described his findings, first to patrons of the school district, then during a special school board meeting.
“These are agreed upon procedures, this is not an audit,” Mongeon said. “What we have here is a system of controls that are weak. What do you do? You put in stronger controls.”
According to Smith, who was charged with supervising the investigation, a complete audit would have cost the school up to $60,000 and since they didn’t suspect fraud, he didnt’ think it was necessary to dig that deep into the system.
Instead, after meeting with the attorney general, Smith said the investigation became the procedures that were agreed upon by the school board and the state of North Dakota. That investigating by Brady Martz did cost the district approximately $16,000.
“A complete audit would be extremely expensive and labor intensive,” Smith said. “To go into it, I’m worried about what it would cost the school district. Instead, I developed steps to provide a reasonable assurance to correct these problems.”
Perhaps the biggest issue dealt with payroll records. Mongeon and his team reviewed teacher contracts, hourly employees’ salaries, the business manager’s salary, the accounting software and employee files. During that investigation, they found numerous issues, most notably that many employees were paid incorrectly over the four-year period, taxation was sometimes incorrect as was teacher’s retirement deposits. Contracts were signed, but the board president’s signature was often a stamp rather than a signature which, in effect, was controlled by the business manager.

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